Why does KBW Ventures invest directly in companies, rather than in Venture Capital funds?
Venture Capital is all about growth and value-creation. In a low interest rate economy, growth translates most quickly to increased enterprise value. Historically, investors in the Venture Capital asset class invested almost exclusively in VC funds. KBW Ventures believes that direct investments are a better way to enhance overall returns, while also shortening the investment horizon. From a fee perspective, direct investing is also a lower-cost strategy than the Limited Partnership route.
Which sectors and geographies in particular is KBW Ventures targeting?
Our primary focus is in US Venture Capital, in particular in Silicon Valley. The US accounts for 55 per cent of all global Venture Capital investment, with Silicon Valley accounting for half of that. KBW Ventures invests in venture-backed technology companies. We do not invest in real estate, infrastructure or project finance ventures, but we do include healthcare technology companies within our investment focus.
Who are KBW Ventures’ co-investment partners?
KBW Ventures leverages its close relationships with a small handful of important, large Venture Capital Platform Managers, each of which typically has hundreds (or thousands) of portfolio companies that we can access for direct investments. Our first five Venture Capital Platform managers have over $25 billion in Venture Capital assets under management, and direct and indirect investments in more than 10,000 venture-backed companies.
Why is KBW Ventures taking this strategic approach?
KBW Ventures’ view is that while co-investments have been relatively successful in the leveraged buyout industry for some years, the time is ripe to apply this method to Venture Capital. Co-investments are seen as being more challenging for Venture Capital funds, as the investments are typically much smaller and it has traditionally been difficult for institutional investors to value companies that have significant growth potential. KBW Ventures will solve this problem for investors via our dedicated team of Venture Capital specialists, who will make decisions on the direct investments. We are not a fund of funds; every client is different and will have a separately managed account.
Does KBW Ventures co-invest with other partners, such as private equity companies?
KBW Ventures invests in Venture Capital-backed companies, not in leveraged buy-outs. We are always minority investors, and we do not use debt leverage for our investments. However, we do invest alongside top-tier Venture Capital firms; a key part of our strategy is to invest in the best companies that are also backed by the best Venture Capital firms.